Why The High Number Of Employees Quitting Reveals A Strong Job Market

While recession fears may be looming in the minds of some, new data from the Bureau of Labor Statistics shows that the economy and job market may actually be strengthening. The quits rate—or the percentage of all employees who quit during a given month—rose to 2.4% in July, according to the BLS’s Jobs Openings and Labor Turnover report, released Tuesday. That translates to 3.6 million people who voluntarily left their jobs in July.

This is the highest the quits rate has been since April 2001, just five months after the Labor Department began tracking it. According to Nick Bunker, an economist at the Indeed Hiring Lab, the quits rate tends to be a reflection of the state of the economy. “The level of the quits rate really is a sign of how strong the labor market is,” he says. “If you look at the quits rate over time, it really drops quite a bit when the labor market gets weak. During the recession it was quite low, and now it’s picked up.”

The monthly jobs report, released last week, revealed that the economy gained 130,000 jobs in August, which is 20,000 less than expected, and just a few weeks earlier, the BLS issued a correction stating that it had overestimated by 501,000 how many jobs had been added to the market in 2018 and the first quarter of 2019. Yet despite all that, employees still seem to have confidence in the job market.

The quits level, according to the BLS, increased in the private sector by 127,000 for July but was little changed in government. Healthcare and social assistance saw an uptick in departures to the tune of 54,000 workers, while the federal government saw a rise of 3,000.

The July quits rate in construction was 2.4%, while the number in trade, professional and business services, and leisure and hospitality were 2.6%, 3.1% and 4.8%, respectively. Bunker of Indeed says that the industries that tend to see the highest rate of departuresare those where pay is relatively low, such as leisure and hospitality. An unknown is whether employees are quitting these jobs to go to a new industry or whether they’re leaving for another job in the same industry. Either could be the case, says Bunker.

In a recently published article on the industries seeing the most worker departures, Bunker attributes the uptick to two factors—the strong labor market and faster wage growth in the industries concerned: “A stronger labor market means employers must fill more openings from the ranks of the already employed, who have to quit their jobs, instead of hiring jobless workers. Similarly, faster wage growth in an industry signals workers that opportunities abound and they might get higher pay by taking a new job.”

Even so, recession fears still dominate headlines. According to Bunker, the data shows that when a recession hits, employers pull back on hiring and workers don’t have the opportunity to find new jobs. Thus, workers feel less confident and are less likely to quit. “As the labor market gets stronger, there’s more opportunities for workers who already have jobs. So they quit to go to new jobs or they quit in the hopes of getting new jobs again,” Bunker says. He also notes that recession fears may have little to do with the job market, instead stemming from what is happening in the financial markets, international relations or Washington, D.C.

So what does the BLS report say about the job market? “Taking this report as a whole, it’s indicating that the labor market is still quite strong, but then we lost momentum,” Bunker says. While workers are quitting their jobs, he says that employers are pulling back on the pace at which they’re adding jobs. “While things are quite good right now and workers are taking advantage of that,” he notes, “those opportunities moving forward might be fewer and fewer if the trend keeps up.”